Mahmood Nanji is the director of the Lawrence National Centre for Policy and Management at the Ivey Business School, University of Western Ontario
As Canadians head to the polls on Oct. 21, they will recall that the 2015 election profiled the need for massive and overdue investment in infrastructure, even at the cost of increasing the deficit. Since then, much of the discussion on infrastructure has been diverted into debates over failed pipeline proposals, the slow pace of public infrastructure investment, and the legal and political troubles of one of Canada’s largest infrastructure and engineering firms.
But, in 2019, Canadians should be even more concerned than before about the substantive issues related to Canada’s economic and social infrastructure, including the challenges and opportunities that lie ahead.
The economy, health care and climate change are likely to dominate the campaign as these issues affect citizens directly and matter even more in an unstable global environment. However, the state of Canada’s infrastructure is vital to all of these priority areas and others. This is a perspective that is shared by the Business Council of Canada, the Canadian Federation of Municipalities and many other informed groups.
With Canada’s vast geography, and diverse and trade-dependent economy, good infrastructure is imperative. Although the period from the 1970s to early 1990s were lost decades of underinvestment in infrastructure, Canadian governments have since made infrastructure a top priority. These infrastructure commitments mirror global trends. The World Economic Forum estimates annual global infrastructure spending at US$3-trillion. But that still falls US$1-trillion short of what is needed, often referred to the infrastructure deficit. Leading the global infrastructure renaissance is China. Its ambitious and increasingly controversial Belt and Road Initiative is expected to invest up to US$8-trillion over the next several decades to improve land and maritime transportation in some 60 countries representing one-third of world trade.
What does all of this mean for Canada? Why should infrastructure policy matter in the upcoming federal election?
Canadians should be encouraged that the federal, provincial and territorial governments have made unprecedented financial commitments, totalling nearly $700-billion over the next decade. Where these commitments are converted to delivered projects, they have paid immediate dividends in terms of public support. A poll by Mainstreet Research shows that 56 per cent of Canadians approve of these infrastructure investments. To maintain this level of support, Canadian politicians will need to go beyond the political commitments and establish a consistent pipeline of projects with a timely delivery schedule.
While the efforts of Canadian governments are laudable, this should not be reason for complacency. Building critical infrastructure should not be just governments’ responsibility. The private sector must play an enabling role through investment, expertise and corporate leadership. New research by Ivey Business School’s Lawrence National Centre, titled Moving Canada’s Economic Infrastructure Forward, finds that successful infrastructure investments will require both business leaders and public decision-makers to overcome six major risks: political and regulatory; governance; funding and financing; industry capacity; innovation and technology; and environmental sustainability and climate change.
As political leaders unveil their policy platforms, there are three critically important issues that they (and the voters) should consider in realizing Canada’s future infrastructure:
(1) Investing in strategic transformational projects: All infrastructure investment does not generate the same level of economic and social benefits. Any national plan must strike a balance between “maintenance infrastructure” – refurbishing, rebuilding or extending the life of existing infrastructure – and “strategic, transformational infrastructure” that creates new opportunities, drives productivity and enhances overall economic competitiveness. The Windsor-Detroit International Bridge, the Trans-Mountain Pipeline Extension and Vancouver’s Canada Line fall into this latter category.
Looking ahead, priority should go to expanding capacity at our tidewater and freshwater ports, building new transit and rail projects, implementing and leveraging digital technologies including 5G networks, and developing resilient infrastructure with the capacity to cope with and mitigate climate change impacts.
(2) Educating Canadians about user pay approaches: Canadians are oddly inconsistent in accepting the need to pay for the infrastructure we use. We accept airport fees, environmental fees and transit fares, but often reject “user pay” for new infrastructure initiatives. For example, Montreal’s new Champlain Bridge was designed as a toll bridge, but an 11th-hour political decision transferred the financial burden on to the tax base. Understandably, politicians loathe to draw the ire of citizens who feel overtaxed. Ontario’s experience with divesting the Highway 407 electronic toll road is cited as a caution. But postponing the debate over how to pay for infrastructure will shape and limit the scale and pace of future infrastructure initiatives, as governments struggle with fiscal constraints, economic uncertainty and populist politics.
(3) Better governance for project prioritization and selection: Project selection, funding and timing have been a source of contention between the federal government and the provinces and territories for many years. At July’s Council of the Federation meeting, premiers voiced their growing dissatisfaction with the current federal infrastructure funding process. Such disagreements are counterproductive and could be avoided. Jurisdictions such as Australia offer some important lessons for Canada in this area, where independent expert bodies provide non-partisan advice on the merits of various infrastructure projects and develop an inventory of ready-to-go infrastructure opportunities.
By international standards, Canada’s infrastructure performance today is rather mediocre. This is surprising, since Canada has an excellent network of leading and talented engineering, design, financing and construction firms and sophisticated government-infrastructure-building agencies, as well as being recognized as a global leader in well-designed, well-executed public-private partnerships (P3s). Collectively, these assets have the potential to advance Canada’s reputation and performance to the top tier globally and could generate significant export opportunities for infrastructure expertise, including creating jobs at home. Canadians should seek leaders who will pave the way to this aspirational but realizable vision.